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Real Estate Tip of the Week: Reasonable endeavours - how much effort is required?

The recent case of Gaia Ventures Ltd v Abbeygate Helical (Leisure Plaza) Limited has provided some helpful pointers on the meaning of "reasonable endeavours" in practice.

The case centred around payment of an overage sum to the claimant (Gaia Ventures). The payment was subject to the developer (Abbeygate) satisfying conditions before the expiry of a ten year period. Abbeygate was obliged to use reasonable endeavours to satisfy those conditions as soon as reasonably practicable. However, having satisfied the conditions four days after expiry of the ten year period, Abbeygate refused to pay the overage monies to Gaia Ventures.

The Court decided that Abbeygate had failed to use "reasonable endeavours" and awarded Gaia Ventures damages of £1.4 million.

The Court noted the following in respect of a reasonable endeavours obligation:

It is a positive obligation and not a promise to act if it happens to conform with existing proposed arrangements.

It requires a reasonable course of action to be taken, but not all possible courses of action.

The relevant action should be reasonable to take (or unreasonable not to take), taking into account the risk of adverse consequences.

What constitutes reasonable endeavours is dependent upon the specific facts of each case in question.

A reasonable endeavours obligation may therefore be viewed as the least onerous of the common endeavour provisions, but this case demonstrates that such obligations cannot simply be ignored.